There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month.
Each Saturday morning I like to share some of the ones I’ve read during the week.
The weekend will be over before you know it, so enjoy some weekend reading.
Coalition offers alternative to Labor negative gearing reforms in 2019 Federal Budget
This week was all about the Federal Budget – with investors eager to hear the Government addressees the future of negative gearing.
This year’s budget offered few incentives aimed at directly addressing housing affordability, suggesting the government was content to let market forces do the heavy lifting in improving conditions for property buyers.
With prices already falling across most capitals and poised to drop further, the budget instead offered a raft of initiatives which will impact home buyers more indirectly by encouraging housing demand outside of major cities.
These included new rail and road upgrades with the potential to make major jobs hubs more accessible to residents of cheaper, regional housing markets.
The government also reaffirmed its prior commitment to reducing migrant intake, which had a pivotal role in driving up home prices in Melbourne and Sydney.
Existing homeowners may see some additional relief from the newly announced tax cuts for those earning up to $126,000, which will ease the burden of mortgage repayments on household budgets.
In presenting a more hands off approach to the housing market, the government offered a clear alternative to the Labor Party’s more interventionist proposals to reform negative gearing, which have attracted controversy.
The government also appeared to heed the warnings of some economists, who said major tinkering with negative gearing concessions in the current climate of price falls could crash the property market and drag down the economy.
Sydney’s median home price fell nearly 11 per cent over the year to March, while the Melbourne median was down nearly 10 per cent.
Prices also declined modestly across Brisbane and Perth while Adelaide prices remained on ice, inching up an average of just 0.8 per cent for the year.
Realestate.com.au chief economist Nerida Conisbee said it was clear the government wanted to avoid “spooking investors” with major housing reforms and aimed to appear as a “safe hand” for the housing market.
Plans for more regional investment would offer some of the biggest long-term benefits for housing affordability, she said.
“They will work by making cheaper housing markets more attractive places to live,” Ms Conisbee said.
Among the budget infrastructure deals promising to make cheaper regional areas more accessible was the announcement of $2 billion for fast rail between Melbourne and Geelong.
The treasurer also noted the government was making a business case to develop other fast rail corridors, including from Sydney to Wollongong and from Brisbane to the Sunshine Coast.
Read the full article here
End of housing downturn draws closer
Is this the end of the housing downturn?
Not too many surprises in the Treasurer’s 2019 Federal Budget, then.
Tax cuts for households were effectively doubled from around $150 billion to about $300 billion, in rounded numbers.
Quite a substantial saving of tax for households was mooted to be released in stages, and more Aussies eventually set to be paying tax at 30 per cent.
There were some more immediate handouts, something of a boost to infrastructure spending, and a broadening of the scope for business asset write-offs.
Nothing too unexpected nor dramatic, but an expansionary Budget nonetheless.
Rentals tightening ex-Sydney
Assuming the Opposition wins the election, as is widely expected, there may be changes to tax policy for housing.
But although this hasn’t showed up in official data yet, the squeeze on property investors is now quietly beginning to hurt some of the people Labor’s policy is designed to help, most notably renters.
I’d suspected this might happen, but had no worthwhile evidence for it until this week.
I’ve been in Melbourne for a few days, and agents are now reporting queues and multiple applications on some rental properties, and offers being made above asking rents prior to settlement for entrant landlords.
This is mainly taking place in the landlocked inner- and middle ring suburbs of Melbourne.
And granted it’s far more so the case for trendy terraces and family homes than it is for apartments.
But it’s the first hard evidence that a reduced supply of rental stock will eventually lead to an accommodation shortage and a spike in rents, with or without Labor’s proposed changes.
The construction pipeline is also now shrinking after a record cycle for housing starts.
Read the full article here
‘Significant’ and ‘surprising’: The RBA may be moving closer to cutting interest rates again
While interest rates remained unchanged for another month – that may soon be changing.
According to an article on Business Insider we may be moving closer to an interest rate cut.
It’s where the bank communicates the reasoning behind its rates decision, along with what it expects to do with policy settings in the period ahead.
In April, Westpac’s Chief Economist Bill Evans believes a “significant” and “surprising” tweak was made.
For those who haven’t read the April policy statement, here’s what the RBA said in the final paragraph. Our emphasis in bold.
The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that it was appropriate to hold the stance of policy unchanged at this meeting. The Board will continue to monitor developments and set monetary policy to support sustainable growth in the economy and achieve the inflation target over time.
We highlighted the final sentence for a reason. It’s the one that Evans believes is significant.
Here’s a short snippet from a research note he released following the April Statement explaining why.
Our research shows that there has been a very significant change in the Governor’s Statement for this month. Recall that Governor Lowe has not changed monetary policy since he became Governor in September 2016. Also note that the key concluding sentence, which has been used in every Statement since October 2016 has been “the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time”. The clear implication behind that statement is an expectation that policy was likely to be on hold for a considerable period. As we have seen, that was an accurate assessment.
In the April Statement, he has changed this language for the first time ever. He still notes that “the Board judged that it was appropriate to hold the stance of policy unchanged at this meeting”. However, he then changes tact with a new sentence. “The Board will continue to monitor developments and set monetary policy to support sustainable growth in the economy and achieve the inflation target over time”. Although, a cursory glance at this sentence might not indicate any change in stance, it does give greater emphasis to the fluidity of the current situation. If this change was not intended, then clearly he would have continued with the approach that has marked his time as Governor.
Therefore this change appears to be a very clear intention to signal that policy is much more ‘live’ than has been the case since the Governor was appointed.
By “live”, Evans is saying the RBA may be far closer to tweaking policy settings, in this instance a rate cut.
While he was a “little surprised” by the RBA’s change in stance, Evans says the tweak is “consistent with our general view that the RBA is on track to adopt an easing bias in May and cut the overnight cash rate in August and November”.
Evans was not the the only economist to take interest in the final paragraph of the April statement.
“It makes sense to view today’s statement as another step in the direction of a formal easing bias,” said Sally Auld of JP Morgan.
Ivan Colhoun of the National Australia Bank was another who believes the tweak is a step towards reducing interest rates again.
“The statement suggests a further step toward considering easing interest rates to support growth and the return of inflation to target,” he said.
Read the full article here
Wiggle, wiggle, wiggle room… just a little bit
How much wiggle room do buyers really have when purchasing their next property?
In this article for Switzer, John McGrath looks at the numbers.
In falling markets like Sydney and Melbourne, today’s buyers have much more wiggle room when it comes to negotiating price.
But how much exactly?
We all know that median house prices in both cities are down 10-15% but buyers shouldn’t automatically apply this to asking prices.
The wiggle room is less than this and I’ll explain why.
Most vendors have now accepted that the market has dropped and they have adjusted their price expectations accordingly, which means some of that 10-15% has already been factored in when a property hits the market with an initial asking price or auction guide.
A recent report from CoreLogic gives a clearer picture of the wiggle room available for buyers.
The report covers the median vendor discount in every capital city.
The vendor discount is the percentage difference between the initial asking or advertised price and the actual sale price.
In Sydney, the median vendor discount over the three months to January was -7.5%.
Very generally speaking, this is how much vendors are willing to negotiate with to get a sale.
This figure provides a clear demonstration of the negotiating power of buyers, with today’s discount actually larger than was recorded during the GFC.
Just a year ago, vendor discounting was much lower at -4.8%.
In Melbourne, the median vendor discount is -7%.
That’s twice what it was 12 months ago and the highest vendor discount ever recorded for the city.
There’s less wiggle room in other capital cities but those that are weakening (i.e. those with increasing vendor discounts) are doing so much more slowly than Sydney and Melbourne.
- Brisbane has a median vendor discount of -5.3% compared to -4.4% a year ago
- Adelaide has a median vendor discount of -5.3% compared to -4.8% a year ago
- Perth has a median vendor discount of -6.4% compared to -6.5% a year ago
- Hobart has a median vendor discount of -4.2% compared to -3.8% a year ago
- Canberra has a median vendor discount of -2.9% compared to -2.3% a year ago
Source: CoreLogic. Darwin excluded due to very low sale volumes
Market conditions in many regional areas have weakened in 2019, with home prices falling over recent months. This has led to larger vendor discounts everywhere except regional Tasmania.
- Regional NSW has a median vendor discount of -4.9% compared to -4% a year ago.
- Regional VIC has a median vendor discount of -4.3% compared to -3.8% a year ago (although higher over the past year, today’s discount is actually much lower than in recent years).
- Regional QLD has a median vendor discount of -6.7% compared to -5.3% a year ago.
- Regional SA has a median vendor discount of -6.8% compared to -6% a year ago.
- Regional WA has a median vendor discount of -8.2% compared to -7.7% a year ago.
- Regional TAS has a median vendor discount of -4.4% compared to -4.6% a year ago.
CoreLogic says housing markets across the country are continuing to deteriorate but all at a different pace.
There are fewer buyers but more homes for sale, so vendor discounting might increase further over coming months.
Read the full article here
What is your ‘property personality’? How properties attracts a certain type of person
What does your property say about you?
This article from Domain.com.au looks at your property personality.
When real estate agent Sirah Robb had a challenging home to sell, she was surprised to find buyers who instantly loved it.
While many other inspections yielded negative remarks about the property’s main road position and unapproved granny flat, the eventual buyers had “nothing but positive comments”, says Robb, the principal of Wythes Real Estate on the Sunshine Coast.
“They were an eccentric couple, garden lovers like the sellers and showed me pictures of the property they were moving from, which looked almost identical.”
Robb has had numerous experiences where the personalities of vendors matched those of buyers, causing her to wonder whether a type of property attracts a certain type of person.
She notes that contemporary homes with clean lines often attract detailed, methodical people, whereas “eccentric people tend to be drawn to properties that the detailed person would find cluttered or strange”.
Your property personality
According to psychologist Meredith Fuller, our personalities have a profound influence on our choice of home – right down to colour, decor and materials.
She explains that home buyers fall into two basic types.
The first is the more intuitive, feeling type.
These people walk into a home and instantly know whether it’s right.
“If you’re a feeling person, it’s like this little hint of recognition and you just go ‘yes’,” she says.
“There’s a feeling of familiarity; like this is a place where I can be my true self, this is a place where I know I will be able to relax – everything just works.”
Intuitive people tend to make emotional purchases, based on this sense of resonating with a home and being able to imagine themselves living there.
They won’t mind if a house doesn’t have everything they are looking for, and will say things like, “I just know this is the one for me”.
Opposite to that are the “very logical and matter of fact” home buyers, Fuller says.
“For them it’s a functional thing – a house is a house, not a home.
They list all the things that they need … and they’ll go through and tick [it] off.
The one that’s got the most ticks, that will be the house.”
Fuller says these people choose the house that best fits their requirements – even if they prefer another.
Robb adds that people like these are often detail-oriented.
She sold a property for one couple who provided a thorough explanation of all its features.
“The eventual buyers were asking lots of detailed questions about the properties they were seeing with me and they ended up choosing this property to purchase, along with most of the furniture,” she says.
“They appreciated the extra effort the owners went into to produce a superior quality product that perhaps people who were less detail-oriented didn’t appreciate as much.”
Fuller says thinking about what a home means to you will provide further insight into your choices.
Do you want a haven where you can retreat from the outside world, or a place where you can see people walk by, wave to the neighbours and throw big parties?
Open-plan houses will suit someone who loves being surrounded by family, but others will want some private space. Some people can live with clutter, while it will drive others crazy.
Fuller herself admits to being “a bit messy”, while her husband has difficulty relaxing until things are stashed neatly away.
Mood also has an effect. People suffering seasonal affective disorder, for example, “really need to see light and sun,” Fuller says.
“They’re really good with a north-facing space so that they can get as much sun as possible.”
“Someone else will say, ‘I hate that. I like to draw the curtains and have it all cosy.’ ”
Part of the role personality plays in your choices goes back to childhood, Fuller explains.
People will tend to either choose something that reminds them of their childhood home, or the opposite.
Someone who grew up in a cluttered environment, for example, would either feel comfortable with that, or go minimalist instead.
Read the full article here
Weekend video: Can You Solve The 6s Challenge?
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